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Special rules make excise taxes even more complicated

Aug. 26, 1999 -- September may only have 30 days, but that's enough time to make the rules for depositing excise taxes more complicated than they already are. A related tax tip specifically addressed rules concerning excise taxes payable with Form 720. It focused on a general rule of thumb for depositing excise taxes, the 9-Day Rule and its exception, the September Rule.

This tax tip addresses special rules for depositing excise taxes for ozone-depleting chemicals, fuel, communication and air travel. It also explains complications added to these deposits by the September Rule. Keep in mind that the deadlines discussed here will differ for businesses required to make electronic deposits.

Semimonthly periods and making deposits
There is no apparent rhyme or reason to dates assigned by the IRS for deposits. The IRS bases due dates for deposits on one of two semimonthly time periods. These periods consist of the first 15 days of the month and the 16th day of the month through the end of the month. Remembering these two semimonthly periods will simplify the rules concerning due dates for depositing excise taxes.

If a business owner doesn't electronically deposit tax payments, the deposit must include Form 8109, Federal Tax Deposit Coupon. Business owners who don't have a coupon book should contact a local IRS office or call 1-800-829-1040.

30-Day Rule and ODCs
If a business uses ozone-depleting chemicals or imports products containing these, it has to pay a special excise tax. Along with the tax comes an additional excise tax deadline to remember, the 30-Day Rule. Deposits of these taxes from a particular semimonthly period are due at the end of the second semimonthly period that follows. Taxes for the first semimonthly period are due the 15th of the next month. The due date for taxes from the second semimonthly period is the end of the following month.

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Business owners using ODCs need to pay particular attention to tax deposits for August and September. The 30-Day Rule has an exception known as the September Rule. In 1999, taxes for the last 16 days of August and first 10 days of September are due Sept. 28. Taxes for other periods are to be paid as described in the paragraph above. For example, taxes for the period from Sept. 11 through Sept. 15 are due Oct. 15.

There is a special September Rule for electronic deposits. Taxes for the last 16 days of August and first 11 days of September must be deposited electronically by Sept. 29.

14-Day Rule and fuel taxes
Independent refiners or manufacturers that produced fewer than 1,000 barrels of crude oil per day in the previous quarter must pay excise taxes for kerosene, gasoline or diesel fuel. Deposits of these taxes for a semimonthly period are due 14 days later. Thus, the deposit for the first semimonthly period is due the 29th day of the month, while the due date for the second period will be the 14th day of the month that follows. Keep in mind that if these due dates should fall on a legal holiday or weekend, the deposit must be made on the first business day that precedes this date.

Guess what? As luck would have it, there is a September Rule for this excise tax. For 1999, taxes for the period from Sept. 16 through Sept. 26 are to be deposited electronically by Sept. 29. Pay deposits for taxes over remaining periods of these months as described above. For example, taxes for Sept. 27 through Sept. 30 are due Oct. 14.

Communication and air transport taxes
Business owners who have to pay excise taxes for communications and air transportation can base the tax on the amounts that they have collected and use the 9-Day Rule to make the deposits. Some of these taxpayers can also base their deposits on the amount considered as collected. This is called the alternative method.

Business owners who use the alternative method separate the "collection" period from the "billing" period. The idea is that they don't collect any tax included in items billed or tickets sold until the first seven days of the second semimonthly period that follows the semimonthly period covered by the bill. These deposits are due the third banking day after this seventh day. Are you sure you don't want to follow the 9-Day Rule?

Those business owners who use the alternative method will have to keep a separate record of the tax included in amounts billed or tickets sold during the month. They also need to be careful when they complete Form 720. Even though they are using the alternative method, they will still report the tax included over the billing period instead of the tax collected.

What is the only way this method can become even more confusing? That's right, let's see what happens in September. For 1999, business owners using the alternative method must deposit any communications and air transportation taxes included in amounts billed or tickets sold from Sept. 1 through Sept. 10 by Sept. 28. Tax deposits for remaining periods are due on the third banking day after the seventh day that follows that semimonthly period.

If deposits are electronic, there is a different deadline to follow for the September Rule. Sept. 29 is the due date for electronically depositing communications and air transportation taxes for products billed or sold from Sept. 1 through Sept. 11.

-- Posted Aug. 26, 1999

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